This information can help you decide if a Home Equity Line of Credit ("HELOC") with the option to make interest-only payments for the first 5 or 10 years (depending on HELOC program) is right for you. You should also ask for and read the booklet called "What you should know about Home Equity Lines of Credit" published by the Board of Governors of the Federal Reserve.

The HELOC products we offer only require that you pay the interest due on a monthly basis during the first 5 or 10 years (depending on HELOC program chosen). This is called the "interest-only" period. The interest due each month can change, depending on the amount of money used from the HELOC and the current interest rate. Making just the "interest-only" payments will not reduce the amount you owe on the HELOC during the interest-only period. In other words, if your HELOC is for $20,000, and you draw down all $20,000 the day the loan funds, and make every single monthly payment when due during the interest-only period, you will still owe $20,000 when the interest-only period ends.

After the expiration of the interest-only period and for the remaining life of the HELOC, your monthly payment will be adjusted to a fully amortizing payment of principal and interest. As a result, your monthly payment will likely increase significantly, both because payments will now reflect unpaid principal AND interest (which must now be paid over a shorter period than they would have had you been making fully amortizing payments all along), and because your interest rate will continue to adjust.

While the monthly payments due on HELOC products are generally lower during the "interest-only" period, monthly payments will increase, in some cases dramatically, even if interest rates remain constant, once the "interest-only" period ends. Absent a significant increase in income, repayment of the HELOC could become difficult or impossible for some borrowers. Also, interest rates on HELOC products can generally go higher than most other types of loans secured by your home. Ask your loan officer what the maximum interest rate can be on your HELOC.

We may charge additional interest and/or fees if you choose a reduced documentation HELOC. Because these loans do not require you to submit written documentation verifying your income or assets, they typically have higher interest rates and/or other costs than full documentation HELOC products. If you are considering a reduced documentation feature, ask what you would be required to pay in interest and fees for not submitting income or asset documentation.

Your HELOC may have an "early termination" fee or penalty. This is a fee collected by the lender if you decide to pay off the balance and close the HELOC earlier than agreed to with the lender. Please check with your loan officer to determine if your HELOC will have an early termination fee and what it will be.